The Trends At YeSUN TechLtd (KOSDAQ:250930) That You Should Know About

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at YeSUN TechLtd (KOSDAQ:250930) and its ROCE trend, we weren't exactly thrilled.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for YeSUN TechLtd:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.068 = ₩3.9b ÷ (₩70b - ₩14b) (Based on the trailing twelve months to September 2020).

Therefore, YeSUN TechLtd has an ROCE of 6.8%. On its own, that's a low figure but it's around the 8.0% average generated by the Chemicals industry.

See our latest analysis for YeSUN TechLtd

In the above chart we have measured YeSUN TechLtd's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is YeSUN TechLtd's ROCE Trending?

On the surface, the trend of ROCE at YeSUN TechLtd doesn't inspire confidence. Over the last one year, returns on capital have decreased to 6.8% from 29% one year ago. And considering revenue has dropped while employing more capital, we'd be cautious. This could mean that the business is losing its competitive advantage or market share, because while more money is being put into ventures, it's actually producing a lower return - "less bang for their buck" per se.

The Bottom Line

We're a bit apprehensive about YeSUN TechLtd because despite more capital being deployed in the business, returns on that capital and sales have both fallen. Investors haven't taken kindly to these developments, since the stock has declined 21% from where it was year ago. That being the case, unless the underlying trends revert to a more positive trajectory, we'd consider looking elsewhere.

YeSUN TechLtd does have some risks, we noticed 4 warning signs (and 3 which are significant) we think you should know about.

While YeSUN TechLtd isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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